24 March 2016
Trade and professional associations (hereafter, "Associations") play a vital role in the economy, with their members representing the vast majority of Hong Kong's businesses. Associations have a clear and positive impact on the Hong Kong economy by providing a platform for the promotion of common interests, and a forum for collective discussions and activities such as lobbying, advocacy, research, education and the promotion and improvement of product or service standards.
However, because Association activities usually involve the interaction of direct competitors, and Associations will commonly be the sole provider of certain services to their members, their activities and operating arrangements regularly raise competition law concerns. Hong Kong seems to be no exception.
Considering the significance of Associations to Hong Kong's economy and their potential impact on key parameters of competition such as price, it comes as not surprise that trade Associations have been under the scrutiny of the Hong Kong Competition Commission (the "Commission"), even before the Competition Ordinance came into force on 14 December 2015.
The Commission initiated a vast compliance project in 2015, resulting in the publication of a brochure specifically targeted at Associations in June 20151. The brochure provides guidance on what Associations and their members should be aware of to ensure compliance with the Competition Ordinance. The guidelines on the First Conduct Rule2, published soon after in July 2015, also specifically address the competition concerns which may arise from the Associations' activities3.
Further to the publication of the brochure, the Commission started to review the information available on the official websites of over 350 Associations. Based on this review, the Commission announced on 14 March 2016 that they had identified over 20 trade associations the practices of which would appear to raise significant concerns, such as price recommendations and/or fee scales issued by Associations, including in some cases terms of membership which indicated that failure to follow a fee scale would result in disciplinary action by the Associations. The Commission wrote to a number of Associations to ensure that they were aware of the Commission's concerns. As a result, 12 Associations have indicated publicly that they had revised their practices or were in the process of doing so to remove one or more price restrictions or fee scales.
While the Commission welcomed these positive changes, it also noted that a number Associations were still engaging in conduct that places their members at risks. It also mentioned having received confidential complaints in relation to non-public practices of some Associations and their members, which the Commission is investigating.
In light of this, Associations and their members need to be aware of the Competition Ordinance in Hong Kong and review their current practices as well as their ways of operating. Ignoring the risks is clearly not a viable option anymore.
In this legal update, we summarise how competition law can impact on the activities of Associations, and provide compliance tips of general application.
2. The First Conduct Rule prohibits arrangements between market participants (whether they are competitors or not) which prevent, restrict or distort competition.
3. See in particular, paragraphs 6.14 and 6.56 to 6.68.